APRA announced that Australian regulators (APRA, the Australian Securities and Investments Commission, and the Reserve Bank of Australia) strongly urge Australian institutions to adhere to the ISDA Protocol and Supplement. ISDA has announced that it will launch the 2020 IBOR Fallbacks Protocol and an associated Supplement to the 2006 ISDA Definitions on October 23, 2020. All financial and corporate institutions that use derivatives contracts referencing London Inter-bank Offered Rate (LIBOR) are strongly encouraged to review and adhere to the protocol by its effective date of January 25, 2021.
While the regulators welcome the progress of LIBOR transition in Australia to date, continued focus and effort are necessary, as highlighted in the APRA communication. Adherence is an important step toward the orderly transition of LIBOR-referenced derivatives contracts. It is critical to the mitigation of both individual entity risks and systemic risks associated with the discontinuation of LIBOR. The 2020 IBOR Fallbacks Protocol and associated Supplement to the 2006 ISDA Definitions are needed to implement robust fallback provisions for derivative contracts referencing key IBORs, including the London Interbank Offered Rate (LIBOR). The protocol and supplement are informed by extensive consultation with industry, including in Australia. FSB has also released a statement encouraging broad and timely adherence to the protocol. Industry-wide adoption of the fallbacks protocol is expected to significantly reduce the risks of contractual disputes, litigation, and frustration by creating a consistent approach to fallback rates when LIBOR comes to an end.
Keywords: International, Asia Pacific, Australia, Banking, Securities, LIBOR, IBOR, Derivatives, Benchmark Reforms, Benchmark Fallbacks, ISDA, APRA
Previous ArticlePRA Updates Supervisory Statement on Counterparty Credit Risk
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).
The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.
The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.
The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.
The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.
US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.